Sugar Prices Decline Amid Global Trade Concerns and Crop Updates
May NY world sugar #11 (SBK25) is down -0.32 (-1.67%), while May London ICE white sugar #5 (SWK25) has decreased by -7.50 (-1.38%).
Market Factors Influencing Decline
Sugar prices are falling for the second consecutive day, driven by fears surrounding a global trade war. This sentiment has triggered declines in equity markets, negatively impacting sugar prices. Additionally, a sharp -7% drop in WTI crude oil (CLK25) has reached a near 4-year low, further pressuring sugar prices. Lower crude prices typically reduce ethanol values—potentially leading sugar mills to increase cane crushing for sugar production over ethanol, thereby increasing sugar supply.
Currency Impact on Exports
The Brazilian real (^USDBRL) has also contributed to the bearish trend, falling to a 3-week low against the dollar. This depreciation encourages Brazilian sugar producers to increase export sales.
Recent Weather Reports
A report from Meteorologist Climatempo indicated that Brazil experienced above-average rainfall last week, which is anticipated to benefit the sugar crop. This news led to a drop in sugar prices to 3-week lows on Monday.
Production Forecasts and Market Adjustments
Current forecasts signal a tightening sugar market. The Indian Sugar and Bio-energy Manufacturers Association has revised its 2024/25 sugar production estimate down to 26.4 million metric tons (MMT) from 27.27 MMT cited in January due to reduced cane yields. Moreover, Unica reported a year-over-year decrease of 5.3% in Brazil’s cumulative sugar output to 39.983 MMT as of mid-March for the 2024/25 season. Sugar trader Czarnikow has also lowered its Brazil 2025/26 production estimate to 42 MMT from 43.6 MMT.
Global Sugar Deficit Projections
The International Sugar Organization (ISO) recently increased its forecast for the global sugar deficit in 2024/25 to -4.88 MMT from a prior estimate of -2.51 MMT. This shift contrasts with the surplus of 1.31 MMT seen in the 2023/24 sugar season. Additionally, the ISO has lowered its global sugar production forecast for 2024/25 to 175.5 MMT from 179.1 MMT.
Potential Bearish Trends
Despite the tightening conditions, some bearish projections are emerging. Consultant Datagro anticipates a +6% rise in Brazil’s Center-South sugar production for the 2025/26 season, estimating it at 42.4 MMT. Similarly, Green Pool Commodity Specialists forecast a market reversal, predicting a surplus of +2.7 MMT for the 2025/26 crop year, reversing earlier deficit expectations.
India’s Export Regulations
Another bearish element is the Indian government’s recent announcement allowing sugar mills to export 1 MMT of sugar this season, marking a softening of the restrictions that have been in place since October 2023. Last season, Indian mills were permitted to export only 6.1 MMT, a sharp decline from the record 11.1 MMT exported in the previous year. ISMA estimates a -17.5% decline in India’s sugar production for 2024/25, predicting it would hit a 5-year low of 26.4 MMT.
Thailand’s Production Increase
The outlook for Thailand contributes further bearish sentiment as the Office of the Cane and Sugar Board recently projected a +18% increase in sugar production for 2024/25, estimating it at 10.35 MMT. This follows a production level of 8.77 MMT in the previous season, positioning Thailand as the world’s third-largest sugar producer and second-largest exporter.
Impact of Past Weather Conditions in Brazil
Brazil’s sugar production is still reeling from last year’s drought and heat, which caused significant crop damage in the key sugar-producing state of Sao Paulo. Green Pool Commodity Specialists have estimated losses of up to 5 MMT of sugarcane due to fires. Consequently, Brazil’s government crop forecasting agency, Conab, has reduced its 2024/25 sugar production estimate to 44 MMT, down from the earlier forecast of 46 MMT, primarily due to these adverse conditions.
USDA Projections
In its recent report, the USDA expects global sugar production for 2024/25 to increase by +1.5% year-over-year, reaching a record 186.619 MMT. The USDA also projects an increase in human sugar consumption to a record 179.63 MMT, along with a -6.1% reduction in global sugar ending stocks to 45.427 MMT.
On the date of publication,
Rich Asplund
did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article are solely for informational purposes. For more information, please view the Barchart Disclosure Policy
here.
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